The use of predetermined overhead rates in a job-order cost system makes it possible to estimate the total cost of a given job as soon as production is completed.

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With predetermined overhead rates, the overhead cost for a job is estimated in advance and allocated to the job based on a predetermined rate, such as the machine hours or labor hours. This allows for the total cost of the job to be estimated as soon as production is completed, as the overhead cost is already accounted for.

The Use of Predetermined Overhead Rates in a Job-Order Cost